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Tesla, Panasonic Join Forces On Huge Battery Plant

Japan’s Panasonic Corp. says it will help finance Tesla Motor Inc.’s $5 billion battery plant in the United States. And at least one major investment firm reportedly believes the batteries produced at Tesla’s “Gigafactory” won’t just be powering electric cars.

Panasonic, which already supplies batteries for Tesla vehicles, said July 31 in a joint statement with Tesla that it would invest an unspecified amount of money in Tesla’s lithium-ion battery, whose cost is expected to total about $5 billion. But Panasonic CFO Hideaki Kawai said the amount would depend on demand for the batteries.

Reuters, citing a “person familiar with the matter,” said Panasonic’s initial investment would range from $200 million to $300 million, and may eventually put up as much as $1 billion. This shows how much Panasonic values being an industrial supplier to companies such as Tesla at a time of rising volatility in the market for consumer electronics and strong competition from South Korean companies.

Previously, Panasonic had planned to expand production at a Japanese battery factory and restart a second facility in the current fiscal year ending in March 2014. But the companies said the new plan is for Tesla to provide and manage the land for a U.S.-based Gigafactory and Panasonic’s job will be simply to invest in the manufacturing equipment and make the batteries.

The factory, expected to be built near Reno, is expected to be fully operational by 2020.

Analysts’ reaction to the Tesla-Panasonic partnership was mixed, especially given the spotty sales of Tesla cars since their introduction in 2008.

“It is such a volatile stock, so the reaction can be hard to predict,” Efraim Levy, an analyst for S&P Capital IQ, told Bloomberg News. “With Tesla, you want to see sequential growth in deliveries and a steady increase in capacity.”

Morgan Stanley analyst Adam Jonas is more bullish, noting in an Aug. 1 research report that Tesla’s earnings in the second quarter of 2014 outpaced analysts’ expectations. He also points to Tesla’s plans to build as many as 100,000 cars a year by the end of 2015. “It appears Tesla’s run-rate of production and deliveries is at least one, if not two full quarters ahead of our expectations before the quarter,” he wrote.

Further, the Gigafactory’s products very well may not be limited to auto batteries, according to the business news website Quartz. It says analysts that it has consulted expect the facility to power “everything from drones to consumer electronics devices.”

Quartz reported that it has obtained a document from Morgan Stanley that predicts as Americans and Europeans increasingly opt to sever ties with expensive electric utilities, they may turn to Tesla for affordable solar power – and the storage of it.

Under Morgan Stanley’s scenario, Quartz reported, Tesla-Panasonic batteries could store 10 gigawatt-hours or more of energy per year, enough to power the average home for 1,000 years. It said that could make Tesla’s “most disruptive product” not its cars, but its batteries.

By Andy Tully of Oilprice.com


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